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Did bankers use the MF Global bankruptcy to suppress
gold and silver prices and create the panicked appearance of collapsing precious
metals to give themselves additional precious time to delay the crash of the
Euro and the US Dollar? As crazy as this sounds, a
closer investigation of some key data seems to imply this possibility. Though
bankers claim that they created futures markets to provide a mechanism for
commodity producers to hedge against volatile market prices, I have never
bought the kool-aid the bankers were selling in
this explanation for the rationale behind their creation of futures markets.
Given that today, futures and spot prices for gold and silver in the
short-term are entirely set by banker manipulation of the supply and demand
for paper derivatives that often have no backing of any physical metal, I
believe that bankers created futures markets for the explicit intent of
allowing themselves to manipulate the prices of commodities and to enrich
themselves, and themselves only, through the process of alternately and
artificially inflating and deflating prices as would not be allowed in any
type of free market. In other words, bankers invented futures markets to
allow themselves to siphon off and steal money from other parties that wanted
to invest in commodities with a mechanism, risk-free to them, that required
deception and zero honest work and zero integrity.

The futures markets in commodities is
such a deceptive market that it is hard to know even where to begin to
unravel its many mechanisms of deceit in all their glory. Futures contracts
traded on the world’s largest commodity markets such as the COMEX in New
York and the LBM in London allow bankers to commit reverse alchemy, turning
real physical gold and real physical silver into nothing but false paper
contracts and air. Secondly, through futures contracts traded in New York and
London, bankers routinely defy the economic principles of supply and demand,
and set short-term prices for gold and silver that literally have zero to do
with the supply and demand dynamics of the physical gold and physical silver
market. In the world of physics, such an illogical, comparable feat of
deception would be the indefinite suspension of the law of gravity. Bankers
invented paper derivative gold and silver markets to allow themselves to
literally defy and suspend every single sound economic principle that exists.

This is important to understand because not only does
understanding this concept make the bulk of what you learn in business school
a lie and entirely useless, but also because bullion banks such as Deutsche
Bank, Citibank, JP Morgan, Goldman Sachs et al that serve as the puppet
conduits for more powerful families that control Central Banks, routinely
used to lease physical gold into the open market as their primary mechanism
to suppress the price of gold and silver. However, as their mechanism of
fractional reserve banking began to threaten the viability and utility of the
most widely used fiat currencies in the world, the USD and the Euro, bankers
understood that they needed to utilize and/or create another mechanism to
suppress gold and silver prices that could replace selling physical PMs into
the open market as they no longer wished to give up a solid asset with no
third party counter-risk for what they knew they were turning into
essentially worthless pieces of paper. Thus bankers increasingly turned to
the paper futures markets to manipulate and control the price of gold and
silver and also served up additional bogus derivative products to the public
like the GLD and SLV ETFs. Bankers knew that there was no way they could
possibly control the price of gold and silver if the supply and demand
determinants of physical gold and physical silver had anything to do with the
price, so they conspired to fool the world into believing that the fake paper
price they set was set by the supply and demand of the physical markets.

And here’s where MF Global enters the banking
cartel gold and silver price suppression scheme. Today, short-term futures
and spot prices of gold and silver have almost nothing to do with the
physical supply and demand dynamics of gold and silver, as odd as that may
sound. Bankers created the futures markets and paper derivatives in gold and
silver to kill free markets and for the express purpose of suppressing gold and
silver prices. Today we literally have no idea what the free market price of
gold and silver should be or could be, besides the fact that both would be
multiples higher than their current price, because of the fake paper market
in gold and silver that the bankers created.

As well, bankers ensured that they armed a legion of
worker bees in commercial investment firms all over the world that would
represent these paper derivatives backed by very little physical gold and
silver to their clients as the equivalent of investing in 99.999% pure
physical gold and silver. In doing so, the worker bees
thereby lured people all over the world into what will turn out to be the
fatal mistake of not buying millions of troy ounces of physical gold and
silver and instead buying their offering of fool’s gold and
fool’s silver. When we receive a massive default of gold and silver
futures contracts that stand for delivery on the COMEX or LBM, or if the SLV
and GLD default, then, and only then, will the public start to see true price
discovery of physical gold and physical silver in action. However, for
clients of MF Global, unfortunately, they have already experienced the
mistake of buying fool’s gold and fool’s silver
from the bankers and have received air in exchange for gold and silver
futures contracts they purchased that stood for delivery.

Bankers invented fake paper gold and silver contracts,
because they knew that if they could not fulfill contractual obligations to
deliver physical gold and physical silver because the contracts were a
binding lie to begin with), that they could always renege on these
contractual obligations and give the people the nothingness they truly owned
in return. And thus, we have the story of MF Global.

Ratings agencies downgraded MF Global on Oct 25 and MF
Global declared bankruptcy on Oct 31. If one scours the data that the Chicago
Mercantile Exchange (CME) releases via its aggregated Commitment of Trader
(COT) reports during this time period, one may not notice any data that
immediately stands. However, investigation of the disaggregated reports
reveals far more interesting patterns that almost undoubtedly can be traced
back to the collapse of MF Global. In a period just preceding the MF Global
collapse, from late August to mid October, the open
interest (OI) in longs in gold and silver futures within the Managed Money
category collapsed by 33.75% in gold (202,430 to 136,103) and 44.74% in
silver (29,849 to 16,494). During this exact same time period, shorts in the
gold and silver futures in the Managed Money category increased by 19.3% and
83.82% respectively (see the chart below). Within the Managed Money category,
between Sept 13th and 27th, in just a two-week period, the drop in OI in the
longs in gold and silver futures was even more pronounced, with a 25.41%
plunge and 34.3% plunge in silver. I imagine if someone could trace the
connection of this plunge in OI in the Managed Money category in the gold and
silver futures markets, one would discover that a good deal of the plunge was
somehow directly tied to the impending MF Global bankruptcy and its freezing
and/or liquidation of gold and silver futures accounts in its possession.

After Phase I of the collapse in OI in the gold and
silver futures markets, Phase II followed. When the story about MF Global’s legalized client theft hit the presses, an
enormous public distrust of the entire futures markets started to build. If
clients lost millions of dollars in gold and silver futures accounts due to
forced liquidation or freezing of contracts that they were holding for
delivery, anyone that had considered using the futures markets to take
delivery of real gold and real silver following the MF Global debacle
obviously reconsidered their options. Thus, due to the massive fraud of the
futures markets that was revealed by the MF Global collapse, another huge
drop in the OI of gold and silver longs in the Managed Money category
occurred during Phase II (as labeled in the above chart) that respectively
amounted to an additional respective 11.79% and 7.48% plunge. In essence, it
appears that the MF Global collapse served up the exact same price
suppression effect as a CME issued initial or maintenance margin hike in gold
and silver futures, which forces a tidal wave of unwanted and involuntary
liquidation of gold and silver longs that consequently violate technical
support lines and trigger technical sells.

Of course, we also have to factor in the temporary
OI-increasing effect of the risk-on CME event when they lowered initial
margins to a 1:1 ratio with maintenance margins at the onset of November.
Still, given the figures presented in the chart above, it seems that bankers
used the MF Global collapse to force liquidation of gold and silver longs in
the futures market quite rapidly and drastically. Why is this important? This
is important because typically strong hands ride out any temporary banker
manipulations of gold and silver prices downward. In this case, strong hands,
if they existed at MF Global, were not given this opportunity and were forced
to liquidate or had their accounts frozen whether or not they desired such an
outcome. Furthermore, if primarily strong hands were forced out of the
futures market, this would leave the majority of volume in the gold and
silver futures markets primarily in the hands of the criminal banking cartel.
We’ve seen repeatedly, this past year in the US S&P 500 index, when
low trading volume primarily controlled by the banking cartel has translated
into curious and inexplicable market bounces of 2% in a single day. In other
words, low trading volume allows bankers excessive and easy manipulation over
markets. If this was indeed the scenario bankers deliberately created with
the MF Global collapse, then the MF Global collapse and simultaneous collapse
of open interest in gold and silvers futures certainly would have paved the
way for the banking cartel to easily manipulate gold and silver prices.

There was also further circumstantial evidence that
bankers used the MF Global collapse to collapse gold and silver futures markets
at the end of 2011. For example, in an article posted on the SilverDoctors blog by Jim Willie in which he gathered
data regarding the amount of physical gold and silver ounces represented by
the longs at MF Global that were standing for delivery in the futures markets
before these contracts imploded, he stated: “JP Morgan increased the
amount of registered silver and gold by precisely the amount that was suppose to be delivered [by MF Global]…JP Morgan
effectively averted both a Comex default and a European
Sovereign Debt implosion.”

Silver Lining in the MF Global Debacle?

Can there be a silver lining in the MF Global debacle?
I believe that in the long-term, this extremely unethical, negative event
could transform into a positive game-changer in the way people buy large
amounts of gold and silver. Obviously, the futures market is not a safe
market for anyone seeking to take delivery of millions of dollars of physical
gold and silver as many MF Global clients learned. The GLD and SLV ETFs, of
course, are no safer than any gold or silver futures contract for the same
reasons. So in the future, and I mean the immediate future starting now, I
believe that large buyers of physical gold and silver will now opt to bypass
the bullion bank’s middle men in the futures market and go directly to
the gold and silver mining companies to buy large quantities of bullion. This
should eventually help usher in the death of futures markets as a mechanism
for buying physical gold and physical silver and be a step towards establishing
a free market for gold and silver prices for the first time in our lives.
Mark Cutifani, CEO of AngloGold Ashanti, recently
echoed the same: “Major [asset management fund] buyers are finding it
is hard to get physical gold. People are coming directly to us [for large
gold purchases,] people who want tonnes of physical
gold, people with serious financial muscle, because they are finding it is
very difficult to secure the volume of gold they want. That is something we
have noticed over the last 18 months, and it has been increasing in the last
six months. People are finding it’s hard to get physical gold.”

People that want to own physical gold and physical
silver never should have been buying the GLD, SLV, or gold and silver futures.
Now, in light of the MF Global debacle, scores of people will stay away from
these fraudulent vehicles for good.

About the author: JS Kim is the Chief Investment Strategist and
founder of SmartKnowledgeU,
a fiercely independent investment research and consulting firm with a mission
to help re-establish the monetary freedom that bankers have stolen from us.
Despite believing that gold and silver will remain highly volatile in 2012,
JS believes that long-term holders of physical gold and silver will be richly
rewarded as bogus paper gold and silver derivatives start collapsing and
reach their intrinsic value in coming years. Follow JS on Twitter and Facebook.

JS Kim is the Managing Director and Founder of SmartKnowledgeU, a fiercely independent investment consulting and research firm that devises investment strategies to protect Main Street from the fraud of Wall Street.

However it is likely that " their entire financial infrastructure" is dependent on what occurs in the future.Small to medium mining companies are very dependent on guaranteed cash flow to continue to be operating.Its not necessarily therefore purely about profit, rather the business about even staying in business.

I'm curious why base producers don't also feel victimized by the pretend market. Why do they participate? If the major producers were to stop selling into the future and instead sell present then they of course would absorb the future market risk. Are they truly afraid of the future? Afraid to find what the real supply/demand answer is? Is their entire financial infrastructure dependent upon what occurs over the next 12- 24 months? It seems to me that each time a producer sells into the future to guarantee it's future profits it also relinquishes control of the future value of the commodity and turns it over to the thieves at the CME, et al. In so doing the base producers succeed in putting a cap on future value or certainly a cap on their real upside potential. When they revisit their next fiscal year to decide upon futures strategies they will be basing their decision upon the value of the futures markets at that time. Control of which they have given to the thieves!

A very good point made here by frankkarl. However it is likely that " their entire financial infrastructure" is dependent on what occurs in the future. Small to medium mining companies are very dependent on guaranteed cash flow to continue to be operati Read more